Canadian Accredited Insurance Broker (CAIB) Three Practice Exam

When is a plaintiff entitled to damages in a performance claim?

1. When performance is judged complete

2. Only when a formal agreement is breached

3. When performance is found to be substantial or a material breach

4. Whenever the service is unsatisfactory

The correct answer is: When performance is found to be substantial or a material breach

A plaintiff is entitled to damages in a performance claim when performance is found to be substantial or constitutes a material breach. This principle acknowledges that not all deviations from a contract warrant damages; rather, the breach must be significant enough to affect the core of the agreement. A substantial or material breach indicates that one party has failed to fulfill their contractual obligations to such an extent that it undermines the purpose of the contract, thus entitling the other party to seek compensation for losses incurred as a result. This standard helps distinguish between minor issues that may not impact the overall performance of an agreement and those serious failures that deprive the injured party of the benefit they were supposed to receive. In determining the extent of the breach, courts will often consider factors such as the purpose of the contract, the nature of the breach, and the overall impact on the injured party's interests. In contrast, simply judging performance as complete does not take into account whether the obligations were fulfilled in accordance with the agreement's terms. A formal agreement being breached is a necessary consideration, but it must be of a material nature to warrant damages. Lastly, while unsatisfactory service can lead to a breach, it must still be substantial enough to meet the threshold for claiming damages legally.